I see that the Associated Press's Derek Kravitz is picking up where his colleague Martin Crutsinger left off in offering up incomplete information and inconvenient truth-avoiding coverage of Uncle Sam's financial results as described in the Monthly Treasury Statement. December's statement, which was released yesterday, showed a deficit of $86 billion and a year-to-date shortfall of $322 billion.
Naturally, this was cause for a positive-spinning headline at the AP report: "US gov't on pace for smaller deficit in 2012." Whoop-de-doo. Two problems: a) It's too early to tell, b) the year-to-date reduction thus far is fairly small (about 13%), c) Most of the improvement is because of a lucky break when fiscal 2011 ended, and d) December itself was a pretty bad month compared to December 2010. Here are several paragraphs from Kravitz's concoction (bolds and numbered tags are mine):
The federal deficit was lower in the first quarter of the 2012 budget year than the same period last year. [1] Yet, the imbalance remains high by historical standards and should keep lawmakers debating tax increases and spending cuts through Election Day.
The Treasury Department said Thursday the deficit was $86 billion in December. [1] And it was $322 billion through the first three months of the budget year - $47 billion less than the same time last year.
Part of the reason for the lower deficit is an accounting quirk that shifted some early payments to the final week of the previous year's budget. [2]
The Congressional Budget Office estimates the government will run a $973 billion deficit for the entire 2012 budget year, which began on Oct. 1. [3] While lower than last year's $1.3 trillion imbalance, it would be higher than any previous deficit before fiscal year 2009.
... After factoring in the impact of the accounting shift, government spending totaled $892 billion through the first three months of this budget year. [2] That's roughly the same as the first three months of last year. Net interest payments on the government debt continue to be one of the fastest rising categories of government spending.
Government revenues were also up. They totaled $555 billion through the first quarter, up more than 4 percent from the same period last year. [3] Increases in individual and corporate income tax receipts helped boost revenue, a sign the economy has strengthened from the previous year.
Notes:
[1] -- The year-to-date deficit is lower, but Kravitz didn't tell readers that December's deficit came in about $8 billion higher than last year's $78 billion. He also "somehow" forgot to note that December's spending of $325.9 billion was the highest December on record, eclipsing 2010 ($315.0 billion), 2009 ($310.3 billion), and 2008 ($289.5 billion). Until October 2008, the government never spent over $300 billion in any single month. in the past 39 months, it's happened 15 times.
[2] -- To his credit, Kravitz attempted to adjust reported spending for the timing situation described. To his detriment, the numbers aren't right. The adjusted full-quarter spending total of $892 billion Kravitz presented (to his credit) is only $15 billion higher than the government's reported $877 billion. That's far less than the $31 billion timing difference the Congressional Budget Office identified in its October 7, 2011 Monthly Budget Review:
The timing shift ... (affecting certain Medicare payments, military pay and retirement benefits, veterans’ compensation and pensions, and Supplemental Security Income benefits) increased outlays by $31 billion in September 2011.
That amount was confirmed in the CBO's next Monthly Budget Review on November 7, 2011. Adjusted full-year spending after considering the year-end timing situation is really $914 billion.
Thus, the "accounting quirk" explains about two-thirds of the year-over-year deficit reduction ($31 billion divided by $47 billion). That's a lot more than "part of the reason for the lower deficit."
[3] -- While collections (a better word than "revenues," a term which should generally be reserved to describe sales at companies and other businesses) are up 4.4% for the year, they were only up by 1.3% in December, one of the government's five biggest collection months (the others are January, April, June and September). December's collections were 13% lower than those seen four years ago. About one-third of that difference is because of the payroll tax cut of 2011. But it is again confirmation that the economy is nowhere near where it was four years ago.
Beyond that, CBO's projection of a deficit of "only" $973 billion assumes that the government's full-year receipts for fiscal 2012 will come in at all-time record $2.635 trillion, or 14.4% higher than fiscal 2011. To get there, receipts during the rest of the fiscal year will have to beat fiscal 2011 by 17.4%. To by unduly kind, that hardly seems assured. Oh, and those CBO projections assumed that the payroll tax cut amounting to about $10 billion per month would expire. Meanwhile, analysts are busy revising their economic growth forecasts for 2012 downward. CBO assumes 2012 growth of 2.7%, while forecasters are at 2.0% or slightly higher.
Sorry, Derek and AP, three months in, it's way too early to credibly report that the budget deficit is on pace to go down for the full year. It's as silly as making a big deal over a Major League Baseball player who hits 19 homers in his 40 games being "on pace" to beat Barry Bonds's record of 73 in a full year.
Cross-posted at BizzyBlog.com.
